GOP Starts the Tax Reform Process on Budget Vote in the House

On Thursday, the U.S. House took the first step towards the first major federal tax reform in more than three decades when it passed a $4.1 trillion budget on a near party lines vote.

The proposal, which was introduced by U.S. Rep. Diane Black, R-Tenn., would end the current system of seven tax brackets and replace them with three brackets of 12 percent, 25 percent and 35 percent while adding $1.5 to the deficit over the next ten years. Black’s proposal includes language to ensure the budget reconciliation process would be followed which limits the potential threat of a filibuster from Senate Democrats. Under the reconciliation rules, a bill can be passed in the Senate 50 votes and the vice president’s support.

The House passed Black’s resolution on a 219-206 vote. Eighteen Republicans joined the Democrats in opposing Black’s proposal including two from Florida: U.S. Reps. Brian Mast and Ileana Ros-Lehtinen.

From his seat on the U.S. House Budget Committee, U.S. Rep Mario Diaz-Balart, R-Fla., praised Black’s proposal on Thursday.

“The FY18 budget provides a path to fiscal stability and prosperity for our country,” Diaz-Balart said. “This budget serves as a vehicle for meaningful tax reform, which will create a simplified tax code that empowers American families, encourages job growth, and revitalizes our economy. Within the last 10 months, we have seen economic growth and consumer confidence steadily climb, and House Republicans are committed to passing tax reform that will lead to continued growth. The budget also supports our troops and protects U.S. national security interests by providing our military with the robust resources it requires to defend our country. I thank Speaker Ryan and Chairman Black for their leadership on this issue, and I look forward to working with them and our colleagues to create a fair and simple tax code that strengthens our country.”

While most Republicans backed Black’s proposal, Mast said it did not cut spending while adding to the national debt.

“Washington’s spending habits are completely out of control, with debt totaling more than $60,000 per person,” Mast said. “Every year, families and small businesses are forced to set and live by a budget. Unfortunately, today’s vote continues the disastrous trend of passing budgets that don’t really balance by using unrealistic expectations to fake the numbers—something book keepers in any company, anywhere, would be fired for doing.

“After less than a year in Washington, there’s no doubt in my mind that the system is rigged against the vast majority of our country. We need tax reform that lowers rates while closing loopholes used by rich lobbyists. The government needs to spend less and empower the American people to do more. Because this budget doesn’t do nearly enough to end the tax and spend status quo, fails to adequately protect Florida’s seniors and will drive us deeper into debt, I had no choice but to vote no.”

Democrats from the Sunshine State lined up against Black’s proposal. U.S. Rep. Ted Deutch, D-Fla., insisted it hurt programs like Medicaid and Medicare while the proposed tax reforms helped higher earning Americans over the middle class.

"The House Republican budget is a callous proposal to shut down essential programs like Medicare, steal billions of dollars from middle class Americans’ wallets and funnel it to billionaires, and undermine key national priorities by cutting infrastructure funding and wreaking havoc on our health-care system,” Deutch said. "The Republican budget threatens the most vulnerable among us by cutting Medicaid by $1.1 trillion and Medicare by $487 billion over the next ten years. It proposes $50 billion in cuts to veterans’ benefits and $154 billion in SNAP benefits over the same period. And as we face dire international threats from North Korea and terrorist groups like ISIS, House Republicans want to slash our diplomatic and foreign aid budgets by $11 billion.

"This partisan budget ignores so many of the nation’s priorities," Deutch added. “We should be working to reauthorize the Children’s Health Insurance Program, which ensures nearly 9 million kids get access to care. We should be setting up a bipartisan Select Committee on Gun Violence to come up with sensible, bipartisan solutions to our gun violence epidemic. And we should be working together - Democrats and Republicans - to improve our healthcare system, not take away essential health benefits like protections for people with pre-existing conditions.

"This budget, for the fiscal year that began a week ago, is being rammed through the House just so Republicans can move forward with their tax plan that could save President Trump up to $1.1 billion while making middle class families pay more,” Deutch said in closing. “The trillions of dollars in tax cuts to corporations and the wealthiest Americans will be paid for on the backs of millions of hard-working Americans. Tens of millions of American families could see higher taxes from this plan. When 80 percent of the tax benefits go to the top one percent of earners, it was clearly written without the required concern for the other 99 percent of Americans. This House Republican budget is removed from the reality in cities and towns across the country. It does not reflect American values. I am strongly opposed to this budget, and I voted against it."

With the House passing its version, the focus on the budget now heads to the Senate where Republicans will look to keep their majority intact even as some of its members have warned they will not support proposals which add to the national debt.

"A solution for those that think only about "balanced budgets" and to hell with 319,000,000 fellow citizens .... And it makes our country better for our middle class worker/professional bee's, not worse. Me, I love the financial transactions tax, among others set out here. Might just give us enough time to actually put our money to work productively in a real corporation that does something - or makes something that takes time, not in a Trump/Hedge Fund/High Frequency/Corporate Raider Casino.
By Jared Bernstein, WaPo, October 5, 2017
"Psst … Hey, Republicans … Wanna see some payfors?
Who’d a thunk it? Politicians whose constituents get hit by one of the main “payfors” in the Republicans’ tax plan are strongly objecting to that part of the plan.
I’m talking about the elimination of taxpayers’ ability to deduct state and local taxes (SALT) from federal liabilities, a change that would offset $1.3 trillion of the cost of their proposal. According to Tax Policy Center numbers, losing this offset would raise the revenue loss of the bill from $2.4 trillion to $3.7 trillion.
The idea behind the SALT-free tax code was to whack blue states that collect significant revenue. Republican tax writers believed, correctly, I suspect, that states and localities would have a much harder time sustaining their tax base without the federal write-off. As was easily predicted, however, Republicans from those states objected, and it now appears that Republican tax writers are considering losing the payfor.
That means they’re going to need other payfors, and good news, Rs: I’m here to help! Here is a list, with rough numbers, of ways to raise revenue. But first, note that these ideas all make the tax code more progressive, so they help fix the two main flaws in your plan, which are significantly raising inequality and losing gobs of revenue. Second, you won’t love these ideas, but jerk not your knees and give them a listen. Third, Democrats, pay attention. These are some of the components of real tax reform — as opposed to tax cuts, which is what we’re talking about today — defined as a plan that raises the revenue we need while pushing back on market-driven inequalities.
Cap all deductions: Of all the ideas that follow, this may be the only one with any hope of appealing to the unknown but probably tiny number of Rs who actually care about deficits and debt. Don’t try to pick off a politically motivated payfor like SALT, which, as you see, simply angers its beneficiaries. Instead, allow everyone above a certain income level — say the top 10 percent — to keep their itemized deductions but at a lower rate. Instead of taking deductions at their top income tax rate, which is now about 40 percent, they’d take them at, for example, 25 percent. Not only does this reform raise serious revenue — around $700 billion over 10 years — but since a lot of these deductions subsidize activities that wealthy households would do anyway (retirement savings, home-buying, sending kids to college), reducing them boosts efficiency in the tax code. Of course, now you’ve angered all the lobbyists, but at least no one’s getting singled out.
“Stop coddling the super-rich!” That was the name of a Warren Buffett op-ed from a few years ago, and while I know this is a heavier lift for Rs — “coddling the rich” is analogous to assuaging the donors — it makes no sense to waste revenue loss on the one group that’s consistently been crushing it for decades. New data from the Federal Reserve reveals that over the past few decades, the share of wealth going to the bottom 90 percent is down about 10 percentage points while that going to the top 1 percent is up by almost that same amount.
Given that reality, why kill the estate tax? It hits only the richest top 0.2 percent of estates and squanders $240 billion over 10 years for no known growth effects (the estate tax was temporarily eliminated in the 2001 tax cut, and analysts found zip in terms of growth impacts). In fact, you should take the next step and end “step-up” basis, a provision that allows heirs to avoid capital gains taxes on inherited wealth. That would also bring in north of $200 billion over 10 years.
I’d make the same argument for the big, proposed cut on high-end pass-through income, which only helps the richest 14 percent of such businesses.
A tax on carbon: I know, the Rs aren’t exactly looking for new taxes, but this idea has currency in mainstream Republican circles. It could take the form of a higher federal gas tax, which has been stuck at 18 cents since 1993 as it’s not indexed to inflation. Meanwhile, the costs of highway and transit maintenance have gone up as has vehicle mileage, which is why the highway infrastructure trust fund is always broke. One plan to raise the gas tax by 12 cents a gallon over two years and then index it to inflation would raise around $200 billion over a decade.
A tiny tax on financial transactions: Okay, now I’m really just talking to Democrats, but a tiny, few-hundredths of a percent tax on security trades would both dampen wasteful noise (i.e., high-frequency) trading and raise a few hundred billion over 10 years. It would also raise money from a sector that arguably does not contribute enough to the government that bailed it out back in 2008. Traders claim that higher transaction costs will dampen market liquidity. Maybe a little, though a dime on a $1,000 trade is unlikely to have much impact. But as I recently wrote on this point: “Today’s financial markets are afflicted by too many high-frequency trades that have nothing to do with efficient capital allocation and everything to do with nanosecond price arbitrage.”
I see no rationale for a big, wasteful, regressive tax cut, especially one that hugely favors the households and businesses that have consistently been doing the best in pretax terms. Sacrificing vital resources to make them even richer after tax is both unfair and fiscal foolishness of the highest order. But if there’s anyone out there on the conservative side — and that’s a big “if” — who wants to offset at least part of the cost of this monster, feel free to tap any of the above."